As we discuss the national budget for fiscal year 2026, there is an excitement over the national budget exceeding $1 billion. Whilst this is a commendable aspiration, several concerns remain, and one of those concerns is the management of public debt. Under Ellen Johnson Sirleaf’s presidency in 2010, Liberia received approximately $4.6 billion in public debt relief. This debt waiver occurred through the Heavily Indebted Poor Countries (HIPC) initiative and other negotiations with bilateral and private creditors. This was a significant gain for the country. However, as we speak, the nation is gradually becoming heavily indebted once more, which has the propensity to undermine the gains made in 2010. Whilst it is true that debt is a fundamental part of any national economy, we can’t afford to accrue debt without due diligence to ensure we yield the best possible returns. This is where this article comes in as we discuss the FY2026 National Budget.
By Dr. Clarence R. Pearson, Sr., PhD, contributing writer
The Rising Tide of Debt
Liberia’s public debt profile between FY2024 and FY2025 reveals a consistent upward trajectory, with debt servicing obligations rising alongside new debt accumulation, signaling a tightening fiscal space and a growing pressure on domestic revenues that are already overstretched by recurrent expenditure demands.
Debt Servicing Trends
In FY2024, Liberia’s debt service obligations hovered around US$160 million, primarily driven by domestic debt repayments and interest on external loans; by FY2025, this figure climbed closer to US$180 million, a clear indication that the cost of maintaining existing debt is rising faster than the pace of economic expansion.
Additional Debt Accrued
During the same two-year period, Liberia added an estimated US$100–150 million in new borrowing, reflecting both increased reliance on treasury bills (T-Bills) to meet short-term liquidity needs and the continued signing of concessional external financing agreements to close budget gaps and support infrastructure projects.
What the Data Really Says
The combined picture shows that while revenue collections have modestly improved, debt servicing is consuming a growing share of national resources; in FY2025, nearly 20% of the national budget went to paying past debt, crowding out essential investments in health, education, energy, and agriculture.
Structural Causes Behind the Trend
The data reveals that Liberia’s fiscal stress is not simply the result of high borrowing, but of a structural imbalance: too much of the budget is tied to recurrent costs, too little is directed at productive investment, and the economy remains undiversified, making revenue growth insufficient to keep pace with rising debt commitments.
Advantages of Current Borrowing Patterns
On the positive side, concessional external borrowing gives Liberia access to long-term, low-interest financing needed for infrastructure, while short-term domestic borrowing through T-Bills provides immediate liquidity to cover cash-flow shortages without excessive delays in service delivery.
Disadvantages and Long-Term Risks
However, the disadvantages are increasingly evident—domestic debt carries high interest rates, external loans accumulate over time, and rising debt servicing obligations reduce fiscal flexibility; moreover, rollover risks for short-term domestic instruments can quickly escalate into solvency concerns if revenue growth slows.
Best Practices from Africa’s Stronger Performers
African nations that have managed debt prudently—such as Rwanda, Botswana, and Mauritius—share several common strategies: they cap domestic borrowing, aggressively expand export capacity, prioritize value-added sectors, implement strict fiscal rules, and align national borrowing with measurable returns on investment.
Practical Recommendations for Liberia
Liberia must adopt a debt sustainability framework that limits domestic borrowing to no more than 2% of GDP annually, restructures high-interest obligations where feasible, strengthens the Liberia Revenue Authority’s digital tax reforms, and links all new external borrowing to projects with clear economic returns or demonstrable social impact.
A Path Forward for Stability
Ultimately, Liberia’s debt trajectory can be stabilized only through a combination of disciplined fiscal management, diversification of the economic base, expanded domestic revenue mobilization, and a deliberate shift from consumption-heavy budgeting to investment-driven growth—an approach that would place the country on firmer financial footing and reduce its long-term vulnerability to debt distress.
Corruption and Liberia’s Domestic Debt Trap
Liberia’s rising domestic debt burden cannot be divorced from the country’s persistent allegations of corruption, fiscal manipulation, and opaque public-finance practices. Over the years, patterns have emerged where inflated claims, non-transparent borrowing, and artificially bloated domestic arrears appear to serve as avenues for enrichment by political actors and well-connected businesses. When government agencies deliberately overstate obligations, submit inflated invoices, or recycle old debts as “new,” the end result is an expanding domestic debt stock that bears little relationship to real economic activity. This dynamic inflates the national debt artificially and forces the government to commit an increasing share of the budget to debt servicing—essentially paying for historical corruption rather than financing current development.
A second channel through which corruption fuels high domestic debt is the widespread use of short-term Treasury Bills (T-Bills), often issued under the guise of “cashflow management” but in reality influenced by political patronage. In such scenarios, individuals with inside access can purchase T-Bills at high interest rates, profiting handsomely from the government’s fiscal desperation. The more corruption weakens revenue administration—through tax evasion schemes, illicit duty waivers, and political interference—the more government turns to borrowing, worsening the cycle. Ultimately, domestic debt becomes not a tool for economic stabilization but a financial mechanism captured by elites, draining national resources while delivering no tangible improvements for ordinary citizens.
To reverse this trajectory, Liberia must implement uncompromising fiscal governance reforms: publish the full domestic debt registry quarterly; mandate independent audits of all domestic claims before payment; criminalize and prosecute the inflation of debt and fraudulent arrears; cap domestic borrowing through legislation; and prohibit political officials from directly or indirectly participating in T-Bill markets. Additionally, digitizing procurement, enforcing real-time expenditure tracking, strengthening the General Auditing Commission, and empowering the Liberia Anti-Corruption Commission with prosecutorial authority are essential steps. Only by closing the channels through which corruption shapes public debt can Liberia restore credibility, stabilize its fiscal position, and prevent future generations from inheriting obligations created not by development needs, but by corrupt manipulation of the nation’s finances.
